More delay seen in iron ore exports from Karnataka

New Delhi: Karnataka state could start issuing iron ore shipment permits within 15 days, two month after an export ban was lifted, but traders said they did not expect overseas sales to pick up before September when monsoon traditionally ends.

The southern state, which accounts for about a quarter of supplies from India, was ordered on 5 April by a court to lift an export ban on iron ore imposed last year in a drive against illegal mining and to keep supplies for local steelmakers.

Issuing of transport permits to traders had been delayed while the state puts in place infrastructure such as checkpoints and satellite tracking systems to prevent illegal mining.

“We are giving final touches to the permit orders. We hope to clear the first batch of the export permits may be within a fortnight,” he said.

But while the state government has termed the delay as procedural, iron ore trade sources say they are concerned that the original ban and now the delay in resuming exports was due to a political battle between the federal government and India’s main opposition party, which rules Karnataka.

Bharatiya Janata Party had faced pressure from Congress party-led government to tackle accusations of corruption and illegal mining in Karnataka.

Indian iron ore traders also say there is pressure from domestic steelmakers to keep the commodity in the country.

“Political reasons could also delay the overseas sales and the iron ore exports could only pick up from October, once the four-month long rainy season gets over in September,” a Bangalore-based senior official working with a global trading firm said on condition of anonymity.

“There will not be any huge exports even if the Karnataka state government issues permits this month,” the official said.

Srinivasa said shipments could take place via big ports like Mangalore during the rainy season, but shipments via small ports could be hit due to logistical reasons caused by monsoon rains.

But traders differ with Srinivasa’s optimism.

“Exports could be possible during the monsoon season, but at a slow pace, not as fast as the state government promises,” said a Kolkata-based exporter who has business interest in the southern state.

During the monsoon, overseas shipments of iron ores come to almost a halt at ports in western Goa state, the main exporting province, and also in eastern Orissa state, the third biggest producer of the steel making raw material.

Iron ore traders say that the domestic steel-making lobby is more powerful than the iron ore export lobby, possibly retarding the pace of export growth in coming months.

The federal government has already quadrupled taxes on iron ore exports and raised freight rates to boost the domestic steel industry and create jobs.

The Karnataka export ban also resulted in an annual 13% decline in the iron ore shipments for state-run Shipping Corp of India to 87.3 million tonnes in 2010-11.

Tighter supplies from India, along side strong demand from China, had helped global prices soar, with spot prices hitting a record near $200 a tonne in mid-February.

Most of India’s approximately 100 million tonnes of iron ore exports land in China, which has the world’s largest steel industry.